Double-Dip Recession? 4 ETF Plays, Just In Case (VIXY, VIXM, PSQ, QID, TLT, GLD, USO, DBC)

If the United States goes through another recession, here are ideas that could be valuable:

 

The Volatility Index

If the U.S. economy goes through another recession, volatility will increase as it does in any period of mass selling and market uncertainty. In today's advanced trading world, one can buy an ETF that follows the Volatility Index. These ETFs include: The ProShares VIX Short-Term Futures ETF (NYSE: VIXY) or the ProShares VIX Mid-Term Futures ETF (NYSE: VIXM).

 

Inverse or Short-Biased ETFs

Since a recession causes massive selling pressures on equity markets, one can delve in to the realm of short-biased ETFs. There are many types of short ETFs, some even include 2 and 3 times leverage built-in. Any short ETF would work, it just depends on how much risk one is willing to take. So basically these ETFs short the exchange it is following. For example, look at the ProShares Short QQQ (NYSE: PSQ). This follows and essentially shorts the NASDAQ Composite Index. One can also buy ETFs that take advantage of leverage. Using the previous example, look at the ProShares UltraShort QQQ (NYSE: QID). This ETF basically shorts the NASDAQ Composite Index using 2x leverage.

 

A list of inverse or short-biased ETFs can be found here.

 

Treasury/Bond ETFs

Investors would like a safe-haven to put their money in, and Treasury Bonds would be that place. This is a very low-risk play that could go either way. The iShares Barclays 20+ Year Treasury Bond (NYSE: TLT) is a safe place to put one's money.

 

A list of other bond ETFs can be found here.

 

Commodity ETFs

Similar to the previous idea, investors will want to look to put their money in a safe place. This could include precious metals via SPDR Gold Trust (NYSE: GLD), oil & gas via United States Oil Fund (NYSE: USO), or other types of commodities via PowerShares DB Commodity Index (NYSE: DBC). Again, investing in commodities is a less risky play than the short-biased ETF play described above, though it is a little more risky than putting money in Treasury Bonds.

 

A list of commodity ETFs can be found here.

 

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